Personal and cyber - connecting the dots

Posted on:
22 February 2018

By James Tucker, smart technology manager

In today's digital world, consumers expect everything from their heating to their kitchen appliances to be connected. While this presents challenges for the insurance industry, it presents some significant opportunities too.

In terms of challenges, today's insurance customers have very different cover requirements. As well as covering their physical items, they want to make sure their digital belongings are insured. These might include their digital photos and music collections but personal data too. The connected world also brings different risks. Alongside the more traditional perils of fire, flood and theft, insurers must also consider digital risks such as identity theft, loss of data and ransomware.

The industry is already beginning to respond to this shift. Cyber policies have been available in the commercial market for many years and the first personal lines product was launched in India this November. The plan, from Bajaj Allianz General Insurance, provides coverage for individuals who are victims of threats such as cyber-attacks, cyber extortion and cyber bullying.

Although products will need to evolve to meet changing needs, the connected world gives the insurance industry an opportunity to gain a much better understanding of the risks customers face. Digital sensors included in today's smart homes can relay real-time data to an insurer, improving underwriting and enabling powerful risk management and mitigation.

Telematics is the perfect example of this. As well as helping an underwriter assess risk, the data helps to inform business areas such as fraud and claims handling while also encouraging better driving habits.

Homes and workplaces are now set to see similar benefits. Technology such as leak detectors and electric current, motion and air quality sensors can help to address many of the physical risks customers face, enabling them to live or work in much safer environments.

Similarly the wealth of data that will become available to insurers will enable them to understand more about their customers, with this insight reflected in pricing. It's highly likely that tomorrow's insurance professionals will look back on today's practices and wonder how we ever made decisions with so little data.

Against this shifting backdrop, there's also the potential for the digital world to completely reshape the insurance proposition. Rather than the string of separate products that is standard today, it may be more appropriate to write a digital risks policy that incorporates all of these covers. This product, a sort of you and your life policy, would be easier to understand and could flex to customers' changing needs.

And, while there's still plenty of speculation around how the connected world will shape insurance, as these technologies are already available, this futuristic view could be just a few years away.

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